States Shift Foreclosure-Suit Funds

By

Nick Timiraos

Oct. 18, 2012 12:02 a.m. ET

When states received $2.5 billion from big banks in a mortgage-foreclosure settlement earlier this year, the expectation was that most of it would be used to aid distressed homeowners. But so far, less than half of the money has been designated for that cause—with much of the rest going to help close state budget gaps, says a report scheduled for release Thursday.

In March, 49 states reached a $25 billion settlement with five of the...